Leasing is a medium term financing instrument which can be used for financing fixed and moveable assets, such as farm machinery, equipment, buildings, land, means of transport, etc. The core principal of leasing is the separation of ownership and use of a productive asset: The owner (lessor) hands the asset over to the lessee for an agreed period of time against a periodic payment which covers capital costs, depreciation and a profit margin.

The key benefit of leasing is the relaxation of collateral requirements because the leased asset itself stands as main security. A second advantage relates to the in-kind disbursement mode which avoids the risk of diversion of funds. However, rural lessors face high transaction costs for supervision of lessees, a lack of secondary markets for repossessed equipment, of appropriate insurance products and awareness amongst all stakeholders about the legal and operational features of leasing.